Here is another thing that I think is a best practice. We have lots and lots of businesses that use carbon receipts. The problem with carbon receipts is in very few years they become they’re illegible. They fade or become completely black and you just can’t read them. And to go into an audit where you basically are telling the IRS “Yeah I spent sixty dollars at Walmart for office supplies; trust me even though you can’t read anything on the receipt” is not the best situation to be. So what you could is make a photo copy of that receipt. Attach the original to the photo copy. Even if the original should fade over time, the photo copy will still be legible. Now you will have the original receipt as well as a legible copy. If you’re audited two or three years down the line, you’re golden. You will still know what the expenses were listed on the receipts you still know how it should be presented.
Sometimes there are receipts that you might not remember what the purchase was and what it was used for. For example I recently received documents from a client that included a receipt for what appeared to be a purchase for candy. I was unable to determine how the receipt was applied to the client’s return because purchasing candy for your kids is not a deductible expense. After a discussion with the client, it turned out the client for a short time, ran an unlicensed daycare. This was only for a month and she had long forgotten about the daycare. The candy was for children’s treats at the daycare. Now that is a proper expense. This was a perfect opportunity to demonstrate the need to jot down a short message on the copy of the receipt explaining the purchase. This is not so important for obvious transactions. But for transactions that may not be clear years later how they apply, a short note may make the difference between a receipt being allowed or disallowed in an audit.
I think this is another best practice. You don’t spend a lot of time making a short note but that short note will save you substantial time and money years later if you are audited.
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